Standard & Poor's is the big dawg amongst financial analysis companies and they regularly provide credit ratings that give investors an idea of how risky investing in a business is. Since 2007, Zuffa has been rated as BB-, which means 'more prone to changes in the economy'. In non-creditor speak, that means Zuffa looks stable barring a shift in the economy (lol yeah right USA #1) or shift in consumer taste (aka this all turning out to be a fad).
Now S&P just upgraded Zuffa from BB- to straight up BB and included a bunch of interesting info on how the company makes it's money to justify the switch. Here's some of that via MMA Payout:
-Specific mention is made of the UFC-WEC merger as potential source of incremental ticket and ppv sales growth.
-The volatility of consumer tastes and preferences continues to be a slight concern as these may impact PPV revenues, but the report also cites the development of new fighter talent and regulatory acceptance as additional risk factors.
-However, the company?s strong EBITDA margin and healthy cash flow conversion rate are reportedly sustainable over the near to intermediate term and partially off-set concern over volatility in PPV earnings and risk factors mentioned above.
-The report reinforces that 75% revenues are event-related; PPV buys account for nearly 60% of all PPV event revenue while gate and sponsorships account for the rest.
-The remaining 25% of revenue comes from live and taped broadcasts on SpikeTV, merchandise, and digital media revenue; much of that is broadcast revenue, but an emerging portion is merchandise and digital media.
-EBITDA margins are expected to track within a consistent range in the future, even with expansion into new markets like Brazil.
-Liquidity remains strong due largely to limited capital spending requirements.
Debt: $50 million credit facility expiring in 2012; $425 million term loan due in 2015.
Considering how much money the UFC rakes in off PPV, it's pretty impressive to hear that it only accounts for 60% of the money made off an event. We all know about the UFC's great gate sales, but this shows what kind of sick, sick sponsorship money the company has rolling in. I wish there was more of a breakdown of the non-event chunk that makes up digital media and merchandise ... I'd love to know what kind of dough the UFC makes off locking it's prelims up in that terrible vault of theirs. Considering money isn't a concern but 'development of new fighter talent' is, you'd think prelims could do more than net the company 2$ a pop from a tiny number of hardcore fans.
Source: http://www.fightlinker.com/ufcs-credit-rating-goes-up
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